8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

May 4, 2005

Date of Report (Date of earliest

event reported)

NeoRx Corporation

(Exact Name of Registrant as Specified in Charter)

Washington	0-16614	91-1261311
(State or Other Jurisdiction	(Commission File No.)	(IRS Employer
of Incorporation)		Identification No.)
300 Elliott Avenue West, Suite 500, Seattle, WA		98119-4114
(Address of principal executive offices)		(Zip Code)

(206) 281-7001

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 1 — Registrant’s Business and Operations

Item 1.01.Entry into a Material Definitive Agreement.

On May 4, 2005, NeoRx Corporation (the “Company”) executed a manufacturing and supply agreement with Hyaluron, Inc. Under the agreement, Hyaluron has agreed to manufacture clinical drug product for the Company’s planned picoplatin (NX 473) clinical trials. All services under the agreement are to be provided based on purchase orders submitted by the Company and will be at the fixed cost established for those services under the agreement.  The agreement will continue until April 15, 2010, subject to extension by the parties. Either party may terminate the agreement in the event of an uncured material breach or the liquidation or bankruptcy of the other party. Additionally, the Company may terminate the agreement if it decides to no longer continue manufacturing or distributing picoplatin.

The Company currently plans to initiate a Phase II study of picoplatin in small cell lung cancer in mid-2005 and to undertake a phase I/II study of picoplatin in colorectal cancer by early 2006. See discussion under Item 2.05 below, regarding the Company’s strategic restructuring to refocus its resources to expedite development of picoplatin.

Section 2 — Financial Information

Item 2.05.Costs Associated with Exit or Disposal Activities.

On May 4, 2005, the Board of Directors of the Company approved a strategic restructuring plan to refocus the Company’s resources on the development of picoplatin (NX 473). This restructuring includes the discontinuation of the Company’s STR development program, including halting further patient enrollment in the Company’s current Phase III trial of STR in multiple myeloma, ceasing operations at the Company’s Denton, Texas facility, where STR is manufactured, and reducing the Company’s workforce by 21 employees, leaving a post-restructuring workforce of 29 employees. Under the plan, the Company will conserve its financial resources to focus on launching its picoplatin clinical program, including initiating its planned Phase II trial of picoplatin in small cell lung cancer in mid-2005.

The Company recently has been in discussions with the US Food and Drug Administration (the “FDA”) to modify the patient eligibility criteria as a possible means of increasing slower than expected enrollment in its Phase III trial of STR in multiple myeloma. Based on these discussions and other external factors, the Company concluded that continuation of STR development would not be economically feasible. The FDA indicated that it wants to renegotiate the special protocol assessment for the Phase III trial. The special protocol assessment is a written agreement between a company and the FDA that documents the design and planned analysis of a Phase III study. The changes mentioned by the FDA would have extended the endpoints of the trial, increasing the number of patients and the length of follow-up, all of

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which would substantially increase the time and cost of completion of the trial. The uncertain regulatory situation combined with a changing treatment landscape have made negotiations with potential STR partners more challenging than anticipated and finding a funding partner unlikely.

The Company previously announced that if it did not raise additional funds, either through the sale of securities or a collaborative agreement with a strategic partner, it would need to take significant cost-cutting measures to continue its operations beyond the end of 2005. The current strategic restructuring plan is part of these cost-cutting measures. The Company is continuing to evaluate other areas where additional expenses can be reduced and is reviewing alternatives with respect to the STR related assets. The Company plans to seek additional funding to support the development of picoplatin.

The Company currently estimates the cost of the restructuring to be approximately $2 million, consisting of contract termination costs (approximately $0.6 million), one-time employee termination benefits (approximately $0.6 million), and other program shut-down costs (approximately $1 million).  This does not include any potential asset impairment charges and is subject to future change as further analysis is conducted.  The Company will evaluate its STR assets in light of the restructuring and determine if any impairment exists and, if so, take appropriate actions.

See press release dated May 6, 2005, attached hereto as Exhibit 99.1 and incorporated herein by reference.

Section 9 — Financial Statements and Exhibits

Item 9.01.Financial Statements and Exhibits.

(c)Exhibits.

99.1 - Press release dated May 6, 2005.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	NeoRx Corporation
Dated: May 6, 2005	By:	s/Susan D. Berland
		Name: Susan D. Berland Title: Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release dated May 6, 2005

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EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASECONTACT:      Julie Rathbun, 206-286-2517

NeoRx Refocusing Resources to Expedite Development of Picoplatin

Management to Host Conference Call Monday May 9^th at 8:00 a.m. Eastern

SEATTLE — May 6, 2005 — NeoRx Corporation (NASDAQ:NERX) today announced that it is implementing a strategic restructuring to refocus its resources to expedite development of picoplatin (NX 473), a next-generation intravenous platinum chemotherapeutic agent specifically designed to improve on the safety and efficacy of existing platinum therapeutics for cancer.

As a result of this restructuring, NeoRx has discontinued the clinical development of STR for multiple myeloma and other indications, and will reduce its workforce by approximately 40 percent.  The Company also announced plans to cease operations at its facility in Denton, Texas, where STR was being manufactured.  The Company will redirect its resources to its picoplatin development program, including the initiation of its planned Phase II trial of picoplatin in small cell lung cancer in mid-2005, as well as the initiation of a clinical program in colorectal cancer by early 2006 and potentially other indications.

“While we believe STR is an innovative cancer therapeutic, a variety of factors contributed to our decision to discontinue the program and apply our resources to the development of picoplatin,” said Jerry McMahon, Ph.D., chairman and CEO of NeoRx.  “We have recently been in informal discussions with the FDA to modify the patient eligibility criteria as a possible means of increasing the slower than anticipated enrollment in our Phase III trial.  Based on these discussions and other external factors, we concluded that continuation of STR development would not be economically feasible.  The FDA indicated that it wanted to renegotiate the special protocol assessment for the Phase III trial.  The changes mentioned by the FDA would have extended the endpoints of the trial, increasing the number of patients and the length of follow-up, and thus substantially increasing the time and cost to complete trial.  This uncertain regulatory situation combined with the changing treatment landscape have made negotiations with potential STR partners more challenging than anticipated and finding a funding partner unlikely.”

“We believe that picoplatin represents an exciting and financially attractive product development opportunity based on its anti-tumor activity to date, the success of approved platinum agents currently on the market, such as oxaliplatin and carboplatin, and  the relatively well-understood clinical endpoints and approval pathway for this class of drug,” said Dr. McMahon.  “In addition, encouraging recent data showing the promise of platinums in combination with targeted cancer agents provides us with further confidence in our decision to move picoplatin forward.”

Earlier this week, the Company signed a manufacturing and supply agreement with Hyaluron, Inc. for the production of picoplatin drug product for clinical trials.

The Company currently estimates that it will incur restructuring charges of approximately $2 million during 2005 and 2006 associated with the reduction in force and the termination of contracts and other obligations related to the STR program.  This does not include any potential asset impairment charges and is subject to change as further analysis is conducted.  The Company expects to have a post-restructuring workforce of approximately 29 employees.  As of March 31, 2005, NeoRx had cash and investment securities of approximately $16.1 million, and the Company believes that cash is sufficient to fund operations through 2005.  The Company is continuing to evaluate other

areas where additional expenses can be reduced and is reviewing alternatives with respect to the STR related assets.  The Company will seek additional funding to support the development of picoplatin.

“This decision was difficult because there are so many talented and dedicated colleagues associated with the STR program.  While many will remain to develop picoplatin, we want to acknowledge those individuals who will be leaving and thank them for their important contributions,” continued Dr. McMahon.

About Picoplatin

Picoplatin is a next-generation platinum compound specifically designed to improve on the safety and efficacy of existing platinum therapeutics for cancer.  To date, picoplatin has been evaluated in more than 500 patients in Phase I and II studies in which picoplatin demonstrated anti-tumor activity in a variety of solid tumors, including lung, ovarian, and hormone refractory prostate cancer, and showed a manageable safety profile.  A Phase II trial is scheduled to begin in mid-2005 and will evaluate the single-agent activity of picoplatin in patients with platinum-resistant small cell lung cancer, the most aggressive and deadly form of lung cancer.  The Company also plans to develop picoplatin for other cancer indications, initially colorectal cancer.

Conference Call Details

Management will host a conference call beginning at 8:00 a.m. Eastern Time (5:00 a.m. Pacific Time) on Monday, May 9, 2005, to discuss this announcement and answer questions.  To participate in the live call by telephone, please dial (866) 800-8651 from the U.S., and for international callers, please dial (617) 614-2704.  The passcode for the call is 10850500. The live conference call will also be available via the Internet at www.neorx.com, and a recording of the call will be available on the Company’s Web site for 7 business days following the completion of the call. A telephone replay will be available following the conclusion of the call by dialing (888) 286-8010 from the U.S., or (617) 801-6888 for international callers, and entering passcode 96927361.

About NeoRx

NeoRx is a cancer therapeutics development company.  The Company currently is focusing its development efforts on picoplatin (NX 473), a next-generation platinum therapy that the Company plans to evaluate in the treatment of patients with advanced lung and colorectal cancers.  For more information, visit www.neorx.com.

This release contains forward-looking statements relating to the development and commercial potential for picoplatin and STR, statements about the expected effect of the restructuring on the Company’s future operating results and other statements about our plans, objectives, intentions and expectations.  These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The words “believe,” “expect,” “intend”, “anticipate,” variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Factors that could affect the Company’s actual results include the risk that we do not realize the cost savings and other benefits expected to result from the restructuring; the uncertainty and timing of obtaining additional financing, obtaining required regulatory approvals,  including delays associated with any approvals that we may obtain, the initiation, progress and costs of our picoplatin clinical

trials, generating future revenue from product sales or other sources such as collaborative relationships and future profitability, our dependence on patents and other proprietary rights; and the risks and uncertainties described in NeoRx’s current and periodic reports filed with the Securities and Exchange Commission, including NeoRx’s Annual Report on Form 10-K for the year ended December 31, 2004. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this release. The Company undertakes no obligation to update any forward-looking statement to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.

NOTE: NeoRx and STR are trademarks or registered trademarks of NeoRx Corporation in the United States and/or foreign countries.

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